Finance Minister Jaswant Singh may announce an initiative for trade facilitation to reduce transaction costs while retaining tax incentives and exemptions for exporters.
Sources divulged that Singh, in the Union Budget, will announce the decentralisation and devolution of powers to
determine duty drawback rates.
Customs commissioners across the country will be empowered to determine the brand-specific drawback rates which are normally higher than the industry average. At present, exporters all over the country approach the Directorate of Drawback in New Delhi for fixing the rate on their brands.
With customs commissioners being empowered, exporters need not come to Delhi for their brand drawback rates. Secondly, it would result in lesser hassles for exporters. The costs involved in the entire exercise would be drastically reduced. This has been a long-standing demand of the exporters.
The sources divulged that large exporters dealing with branded consumer products, electronics and automobiles would be the major beneficiaries of this move.
Meanwhile, the finance ministry officials indicated that the tax exemption enjoyed by companies under sections 10A and 10B of the Income Tax Act would be continued notwithstanding the recommendations of the Kelkar Committee seeking immediate withdrawal of this incentive.
The commerce ministry, according to the sources, recommended that Singh should continue with these tax exemptions but also improve upon them. For instance, the tax benefit under Section 10 A of Income Tax Act has been restricted to 90 per cent of the profits and gains from exports. The tax benefits were to be withdrawn from assessment year 2010-11 and subsequent years.
The commerce ministry, according to the sources, has requested Singh to restore the tax benefits on 100 per cent of export profits. Similarly, the nodal ministry has recommended that these benefits should be available for first 10 years after a company commences manufacture and export instead of setting a cut-off year.
The Kelkar committee had sought to provide a preferential treatment only to software exports by retaining these benefits till totalisation agreements were entered into with foreign governments.
The argument put forth by the Commerce Ministry to continue the 10 A and 10 B tax benefits is that withdrawal of these incentives could hamper the exports growth which have picked up in this fiscal. Exports have posted over 12 per cent growth in first nine months of current financial year. In 2001-02, the exports had hit a abysmal low of over one per cent.